Population Density & Customers

If you’ve seen the statistics about the industry before then you know that the average revenue figure (which includes some huge stores) is about \$320,000.  If you split that evenly across the year, you are assuming a \$26,000 in revenue a month.  If you assume that Nov is twice as good and December 3 times as a normal month, than an ‘average’ month would be \$21,333.   So if you figure that you get an average sale of let’s say \$50, you are assuming 426 sales a month or approximately 14 sales a day.  Now, obviously there’s a lot of fudging here (Magic players buy much smaller dollar value but a lot more often, board gamers buy much higher, etc) but you get the idea.

So, let’s say you do need to get 426 people to buy from you and you are an okay salesman; that is, you convert 1 in 10 walk-ins.  That means you need 140 people to come into your store a day or 4260 people a month.  Now, if your population is 50,000 you need 8.5% of the entire town to come in every month just so that you can make your daily bread.

Now, using the US Census age demographics and taking people between 15 to 55 (figuring they are your typical customer group). you have 57% of the population that might be your customers.  That works out to be 28,500 potential customers.  So suddenly, that % of the population has changed to 17% of the group.

That’s a frightening statistic isn’t it?  It’s horrible, but there are ways to change that of course.  The variables involved are:

• Target population number (population density)
• Conversion rate (how many you manage to convert into customers)
• Average sale (if you can sell more, the better of course).

None of this is really true of course – game stores are lucky in that they can create ‘loyal’ customers, who come back all the time.  True fans as some people call them – individuals who will make up a large portion of these sales, leaving the rest to random walk-in’s.  Still, it’s a good idea ot think about what your own conversion rates are.

Attrition Rate: The Decline of Business

Just came from VCon, which as always was fun.  This year, while I don’t have the numbers of attendees it sounded like they had more or equal number of attendees this year than previous years.  However, our sales as Starlit were down significantly – along the lines of 40% from the year before.

Why? A number of reasons I think:

2) Less Space

3) Fewer new returning customers

4) More competition

I’m going to tackle number 3 in this article, because it’s something that preys on my mind regularly.  VCon has over the years that we’ve been going to it stayed the same – same attendance, often the very same individuals and quite often the same vendors.  Few things have changed over the course of the 7 years we’ve been there with attendanc elevels seeming to hover around the 500 – 700 level each year.

What that means is that we’ve been selling to the same customers (for the most part) for 7 years.  And at a certain point customers just have enough games – they start slowing down, they become more selective in their purchases or just stop buying (or coming).  All customers do this, it’s a given.

So the trick in any business is to acquire more new customers – which VCon this year did.  However, if you don’t do it in a regular process, you face another major problem – sometimes, early customers don’t purchase as much.  For example, a lot of younger attendees this year, which was great to see and says a lot of good things for VCon’s on-going growth in the future; but these younger attendees are for the most part either do not have the interest or do not have the disposable income to purchase as much as former attendees.

So our average dollar value of purchases drops, and even if we do the same amount of sales we’re still below our previous year sales.  Now, if each year new customers were drawn in; they too would progress along their buying / life cycle and the total average value would be higher.

And so you can see how a business would decline if it doesn’t get new customers – the old customers leave or move on, no new customers are found or are found too late.  Total sales decline as customers don’t progress fast enough through their buying cycle.

It’s why marketing is a constant need in a business – you have to keep pushing customers in so that you have a constant series of replacements.  If you can push in more customers than you lose, you end up growing.  That simple really.